Complementary Law No. 224/2025 introduced a linear 10% reduction across various tax benefits and incentives previously in force, including several cases of PIS and COFINS relief. As a result, as of April 1, 2026, transactions that had previously benefited from an exemption or a zero rate for these contributions became subject to taxation equivalent to 10% of the standard rate, depending on the applicable regime (cumulative or non-cumulative).
The measure, which might seem reasonable from an equal-treatment standpoint, introduced an odd break in tax neutrality in Article 4, § 7, which bars the purchaser of goods and services from taking PIS/COFINS credits:
“the application of the provision set out in item I of § 4 [10% of the standard rate for cases of exemption and zero rate] of this article does not allow the purchaser of goods and services to take credits that, under the legislation in force, would be barred as a result of the exemption or the application of the zero (0) rate.”
Despite the ambiguity of this wording, Normative Instruction RFB No. 2,305/25 and the Brazilian Federal Revenue Service’s (“Receita Federal”) “Questions and Answers” reproduced the same language, without any further clarification.
Since Complementary Law No. 224/2025 itself imposed a minimum tax burden (10% of the standard rates) on transactions that had previously benefited from an exemption or zero rate, those transactions are no longer fully relieved of tax, effectively ending the exemption or zero-rate situations. Analyzing the wording of the provision, we understand that there are at least two possible readings:
- Full denial of credit: the rule would maintain the prohibition on taking credits regardless of the effective taxation (10% of the standard rates), by reference to the prior legislation, which barred the taking of credits in cases of exemption or zero rate;
- Proportional credit: the credit denial would apply only to the untaxed portion (90% of the standard rate, which remains relieved of tax), making it legitimate to take a credit on the 10% portion that is actually subject to PIS/COFINS.
The first interpretation is entirely anomalous, as it violates both the principle of equal treatment and the non-cumulative nature of PIS/COFINS. After all, denying the PIS/COFINS credit in a situation where the prior stage was subject to tax, even partially, ends up compounding the taxation of these contributions and distorting the pricing of goods and services, calling into question the very rationale of the non-cumulative regime. In other words, it undermines the very purpose of non-cumulativity.
The second interpretation, although it is the one that best aligns with non-cumulativity and equal treatment, requires the interpreter to delve further into the constitutional system and, above all, bear a heavier argumentative burden, insofar as it departs from the literal wording of § 7.
Nevertheless, we understand that the second interpretation is the only one consistent with the Federal Constitution, particularly in light of equal treatment, tax fairness, and non-cumulativity.
In this context, some preliminary injunctions (“liminares”) have already recognized that Article 4, § 7 of LC 224/2025 cannot override the non-cumulative nature of PIS/COFINS, granting taxpayers the right to take proportional PIS/COFINS credits (10% of the overall 9.25% rate).
Given this scenario, companies that purchase goods and services affected by the linear reduction of benefits under LC 224/2025 may consider the following strategies:
- Take the proportional credit (0.925%) and assume the risk of a possible challenge by the Federal Revenue Service, with the ability to mount a defense later at the administrative level (supported by a technical legal opinion grounded in the Constitution);
- File a writ of mandamus (“mandado de segurança”) seeking a judicial decision recognizing the right to the proportional PIS/COFINS credit (0.925%), including a request for interim relief (“liminar”) to have that right recognized immediately.
The absence of clear regulations from the Federal Revenue Service, together with the judiciary’s initial signals, suggests that this issue is likely to become a significant area of tax litigation in 2026.
For further information on this topic, our tax team remains available.
